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California, NY and Texas Lead Way in Collecting Most Taxes
Tuesday, April 16, 2013 6:55 AM


Ever wonder which states collect the most taxes and what the components of their tax structure are?  California, New York and Texas lead the way, but their structures are vastly different. While California and New York rely significantly on taxing income, both personal and corporate, Texas relies considerably on taxing items at their point of sale. This is why a thriving business economy and consumer spending economy is so important to Texas.

The largest portion (77 percent) of Texas’ Tax Revenue arrives from sales tax. Two-thirds of that revenue comes from general sales tax, and the remaining third from selective taxes such as alcohol, tobacco, amusements and gasoline ($0.19 of the price of every gallon of gas is Texas selective tax revenue).

The next largest portion (16 percent) of Texas’ Tax Revenue is licensing tax. Sixty percent of this revenue is from corporate licenses to establish and operate businesses in Texas. Motor vehicle licensing makes up the next 20 percent, and the last 20 percent comes

from an assortment of licensing such as hunting and fishing, amusement parks, alcohol licensing, etc.

The last component (7 percent) of Texas’ Tax Revenue is a severance tax. Basically, this is an abandoning well tax and encourages oil and gas companies to recover as much product as possible from each well rather than just shutting it down.

Besides the energy industry, one of the reasons Texas faired so well in the Great Recession is it doesn’t rely on personal or corporate income tax. Under income tax, when people loses jobs or companies goes out of business the state loses income. However, unemployed people may still have savings to purchase goods and services, thus taxes continue to be paid. Therefore 6.25 percent adds up to a big deal in Texas. (If you are seeing 8.25 percent in the tax line it is because county and city municipalities are allowed to add small percentages onto the 6.25 percent as long as it does not exceed 8.25 percent.)

(Source: TCUL Research on U.S. Census Data)